2017 strategic directions: electric industry survey

BUILDING A WORLD OF DIFFERENCE

2017 STRATEGIC DIRECTIONS:

ELECTRIC INDUSTRY SURVEY RESULTS

Download the report at bv.com/reports

Questions: [email protected]

Black & Veatch Insights Group

Study Overview

Methodology

•Administered online from 9 May 2017

through 29 May 2017.

•Black & Veatch was identified as the

sponsor of the study.

Sampling Plan

•Screening questions were included at the

beginning of the survey to ensure only

qualified participants were allowed to

complete the survey.

•Respondents were randomly selected to

receive one of two survey versions to keep

the survey short.

•Both electric services and industry

were included in the sample.

•A little over 17,000 email invitations were

deployed to electric industry professionals

across the United States.

•Individuals in a director, supervisor or

manager level and above were targeted for

the survey.

Survey Results

•533 survey respondents qualified and

completed the majority of the survey.

•489 respondents completed the full

•44 respondent completed a partial survey.

•Overall response rate for the survey was

percent.

•Because the survey was administered on

line, the amount of self-selection bias is

unknown, therefore, no estimates of

sampling error have been calculated.

•Statistical significance testing was

conducted on the survey results to

determine major findings and differences by

by various firmographic groups.

Please rate the importance of each of the following issues to the electric industry using a 5-point scale.

73%

61%

43%

47%

44%

37%

44%

35%

28%

29%

33%

27%

31%

23%

23%

32%

45%

41%

43%

49%

40%

47%

51%

48%

42%

46%

41%

43%

3%

6%

11%

10%

11%

12%

13%

16%

18%

19%

22%

24%

23%

29%

1%

1%

1%

2%

2%

2%

2%

2%

3%

5%

4%

3%

5%

6%

Reliability

Cyber security

Long term investment

Aging infrastructure

Environmental regulation

Emerging technology

Economic regulation (i.e., rates)

Physical security

Market structure

Aging work force

Natural gas prices

Distributed Energy Resources

Natural gas fuel supply reliability

Fuel policy

Very Important (5) Important (4) Neutral (3) Not Important (2) / Not Important At All (1)

What are the top two major drivers of your company’s transmission investments?

59.9%

34.2%

32.6%

15.0%

3.2%

8.6%

8.6%

Reliability and aging infrastructure within…

Capacity/load growth within your system

Regional economic or reliability related

Regulatory or policy related

Other

Don’t know

None, we do not have any transmission…

What are the major challenges your company faces in your ability to execute your planned transmission projects on schedule and within your budget?

Column % by Utility Type

Which of the following best describes your organization?

Investor-owned utility

Publicly-owned utility

Cooperative

Independent/industrial power producer

Environmental/permitting challenges 56.5% 38.9% 53.3% 28.1%

Regulatory or policy uncertainty 42.0% 33.3% 26.7% 43.8%

Land right and right of way acquisitions 39.1% 44.4% 36.7% 9.4%↓

Major equipment lead time and cost escalation 23.2% 20.4% 13.3% 9.4%

Other competing non-transmission alternatives (such as energy storage, microgrids, distributed generation)

20.3% 14.8% 10.0% 6.3%

Lack of skilled construction labor 4.3% 13.0% 6.7% 6.3%

Competition from proposed transmission projects by others

5.8% 7.4% 10.0% 6.3%

Lack of Federal siting authority 5.8% 7.4% 6.7% 6.3%

None, we do not face any challenges 10.1% 5.6% 3.3% .0%

Other issues 5.8% 1.9% 3.3% .0%

Which of the following statements best reflects your company’s opinion regarding energy storage, distributed generation, and microgrids and how these concepts will impact your transmission investments in the future?





Cooperative


We are just beginning to investigate/explore how these concepts could potentially affect our transmission investment

30.0% 40.8% 61.5%↑ 22.7%

We have done analysis to conclude that these concepts likely could affect our transmission investment

27.1% 30.6% 11.5% 40.9%

We think these concepts are still not proven and we do not think they will affect our transmission investment

7.1% 18.4% 7.7% .0%

These concepts are impacting our current transmission investment program

10.0% 0.0% 3.8% 18.2%

Other opinion 1.4% 2.0% 11.5% 4.5%

Don’t know 24.3% 8.2% 3.8% 13.6%

Which of the following types of incremental electrical generation, greater than 50 MW, will you likely add to your system within the next five years?

43.6%

42.4%

33.9%

28.5%

23.6%

17.6%

1.8%

9.7%

18.8%

Add solar PV (utility scale)

Add wind turbine generation

Add combined cycle gas fired generation

Utilize some form of distributive generation or…

Purchase power from PPA

Add simple cycle gas fired generation

Add coal fired generation

Other

None

Which of the following statements best reflects your company’s overall strategy related to coal fired generation in any form?

40.4%

32.2%

12.3%

8.2%

6.8%

We will maintain a balanced fuel portfolio to

mitigate future unknowns

Coal has no long term play in our generation

profile due to inherent environmental…

Contingent on the price of natural gas

Coal is experiencing a temporary setback and

will generally maintain its current…

Other

Have the current Administration’s announcements to roll back environmental regulations impacted your organization’s future planning?

5.5%

6.9%

20.7%

52.9%

36.1%

5.5%

7.7%

Yes, we have suspended or delayed some capital…

Yes, we are reconsidering or delaying planned…

Yes, we are revisiting resource plans, investments…

No, no significant impact on near-term plans

No, no significant impact on long-range planning

Other thoughts

Don’t know

Which of the following environmental requirements will your organization invest in most over the next five years?

61.3%

21.7%

19.6%

18.2%

10.9%

3.5%

6.7%

7.3%

Renewable energy supply

Solid waste and ash…

Fuel diversity and/or switching

Air emissions control equipment

Wastewater discharge treatment

Cooling water intake structure

Other

Don’t know

How likely are you to spend a significant capital investment ($25 million or more) into your system over the next two years for operational improvements related to Big Data analytics, smart grid improvements, and/or system monitoring?

21.1%

24.0%

16.0%

18.3%

20.6%

Extremely likely

Somewhat likely

Which of the following will be the major sources of financing for grid investments?

51.4%

36.0%

30.3%

26.9%

2.3%

20.6%

Corporate debt

Equity issues

Government investment

Company cash balances

Other debt sources

Don't know

Do you think utilities will seek to finance grid modernization projects with teaming or joint venture partnerships with third parties or other utilities to offset costs?

46.…

20.9%

32.8%

Yes

Do you feel that the U.S. regulatory framework needs to be improved to help you better manage your electrical supply system?

61.…16.0%

22.9%

Yes

Which area of the regulation making process in the U.S. do you feel is most in need of improvement?

33.0%

31.1%

17.9%

14.2%

3.8%

A more current model that reflects changing

market conditions such as distributed…

EPA environmental compliance (Certainty,

longer range plan, less politically driven, etc.)

Ability to rate base costs (i.e. improving

recovery of investment/costs)

A more streamlined approach to approvals

Other

Follow up question if: “Do you feel that the U.S. regulatory framework needs to be improved to help you better manage your electrical supply system? ” choice “Yes” selected.

Do you have a risk profile of your transmission and distribution assets?





Cooperative


Yes, but we are reliant on subject matter expert (SME) expertise or internal knowledge

15.5% 21.8% 20.9% 23.1%

Yes, asset criticality has been assessed and is part of a risk based asset management approach

32.8% 43.6% 23.3% 26.9%

No 3.4%↓ 20.0% 18.6% 23.1%

Don’t know 48.3%↑ 14.5%↓ 37.2% 26.9%

As you replace aging infrastructure, are you installing “smart” two-way communication-capable assets rather than like for like replacements?

15.1%

24.0%36.…3.4%

20.6% Yes, we are replacing all of our

aging infrastructure with “smart”

assets

Yes, we are replacing most of our


assets

Yes, we are replacing some of our


assets

How important is the use of energy storage to increase the deployment of photovoltaics in your generation mix?

22.5%

33.3% 32.4%

9.0%

2.7%

0%

20%

40%

Very important Important Neutral Not important Not important at

all

Displayed only to respondents who DID NOT SELECT “Energy storage is not part of our plans at this time” in question: “Which of the following best describes your company’s activity related to energy storage?“

Which of the following best describes your company’s activity related to energy storage?

45.…

27.8%

14.2%

12.5%Energy storage is on our

technology roadmap

Energy storage is not

part of our plans at this

time

What is your opinion of investments in distributed energy projects relative to your organization?

37.4%

22.3%

18.7%

18.7%

18.0%

2.9%

3.6%

A demonstration or test project

A significant part of our investment in…

A risky investment with questionable…

Not part of our investment plans

A lower risk investment than central station…

Other

Don’t know

Does your company plan to develop, own, and/or operate distributed generation resources, including microgrids?

16.5%

3.6%1.2%

24.3%

3.0%

17.7%

30.9%

12.0%

5.2%

0.5%

27.7%

5.8%

0%

20%

40%

Already developed, owns, and/or operatesYes, in next 5 yearsYes, in next 6-10 years'Yes, in more than 10 yearsNone planned, but is a possibility for future discussion/planningNo, never Don’t know

2016 2017

Is your company considering any of the following approaches to security?

33.1%

33.1%

32.5%

23.5%

22.3%

13.3%

2.4%

34.9%

Legal and contractual risk reduction through…

Managed security services

Segregation of inherently risky networks (mobile…

Security Software as a Service (SaaS)

Cloud security services

Out-sourcing models such as IT Out-Source to…

Other approaches

Don’t know

Has your organization completed a comprehensive real-time monitoring of your Operational Technology (OT) networks?

26.7%

18.6%

54.…Yes

“Don’t Know” Ratings were Significantly Lower for the

Executives Surveyed:36% Yes, 31% No and 33% Don’t

What are your company’s top security concerns?

49.7%

33.5%

24.6%

10.2%

4.2%

1.8%

4.2%

16.8%

Understanding of business and corporate level…

Establishing a corporate culture of compliance or…

Inclusion of security measure design with new…

Lack of funding for security

Executive management support for security…

Other

None, we do not have any security concerns

Don’t know

How are you determining what Internet of Things (IoT) devices will be permitted on your networks?

44.8%

14.5%5.5% 3.0%

12.1%

30.3%

0%

20%

40%

60%

Business

needs drive

this decision

Economic

value drives

this decision

Vendor

partner

choices drive

this decision

Other None, these

are not

permitted on

our networks

Don’t know

Does your company plan to develop, own, and/or operate distributed generation resources, including microgrids?





Cooperative

Independent/industrial

power producer

Already developed, owns, and/or operates

28.4% 34.0% 28.0% 32.4%

Next 5 years 9.5% 4.3% 8.0% 27.0%↑

Yes, in the next 6-10 years 5.4% 10.6% .0% 2.7%

Yes, in more than 10 years .0% 2.1% .0% .0%

None planned, but is a possibility for future discussion/planning

24.3% 31.9% 44.0% 21.6%

No, never 2.7% 4.3% 8.0% 10.8%

Don’t know 29.7%↑ 12.8% 12.0% 5.4%

BUILDING A WORLD OF DIFFERENCE

2017 STRATEGIC DIRECTIONS:

ELECTRIC INDUSTRY SURVEY RESULTS

Download the report at bv.com/reports

Questions: [email protected]

Black & Veatch Insights Group

2017 strategic directions: electric industry survey

Engineering